EUR/USD Fundamental Analysis March 15, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is trading at 1.3014 down from 1.3022 this morning’s opening. The USD has maintained strength against all of its trading partners, having gained energy post FOMC minutes. Earlier yesterday investors positioned themselves for any possible scenario from the Feds and by doing so depressed the USD. The dollar has steadily made a comeback regaining throughout the day. The greenback was supported also by positive data and economic events.

Fed Chairman Bernanke today said again that the pace of the economic recovery has been “frustratingly slow.” Bernanke said that “the condition of community banks is improving” despite economic uncertainties. “Profits of smaller banks were considerably higher in 2011 than in the previous year, nonperforming assets were lower, provisions for loan losses fell appreciably, and capital ratios improved,” In his address Bernanke said. The Fed is trying to listen and understand small banks’ concerns about regulation.

The U.S. current account deficit, on trade in goods and services, income, and donations, widened to $124.1 billion in the fourth quarter, or 3.2% of gross domestic product, much larger than expected. Import prices rose 0.4% in February due to oil, the Labor Department reported. It’s the first increase in since December and biggest gain since April 2011.

U.S. consumers’ pushed up retail sales rose 1.1% to $407.8 billion.

In the FOMC statement released yesterday, the minutes stated. “The recent increase in oil and gasoline prices will push up inflation temporarily, but the FOMC anticipates that subsequently inflation will run at or below the rate it judges most consistent with its dual mandate,” and continued “But the labor market has improved at a faster pace than expected, given the current pace of growth. First-quarter gross domestic product is expected to decelerate to roughly 2% from the 3% pace in the fourth quarter.”

Business inventories climbed in January as car dealers correctly anticipated a strong pickup in demand, according to data released Tuesday.

Inventories rose a seasonally adjusted 0.7% to $1.57 trillion, the largest increase since October, the Commerce Department said.

Today, the first-ever release of GDP data covering all the Group of 20 countries showed the world economy slowed to a quarter-on-quarter growth rate of 0.7% in the fourth quarter from 0.9% in the third quarter.

 

Economic Reports and Events March 14, 2012 actual v. forecast

 

Economic Events Scheduled for March 15, 2012

09:30     CHF       Interest Rate Decision                                 0.00%                    0.00%

Swiss National Bank (SNB) governing board members come to a consensus on where to set the target range for the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.                      

10:00     EUR        ECB Monthly Report      

The European Central Bank’s (ECB) monthly report contains the statistical data that policymakers evaluate when setting interest rates. The report also provides detailed analysis of current and future economic conditions from the bank’s perspective.                                                        

 11:00    EUR        Employment Change (QoQ)                         -0.2%                     -0.1%    

Employment Change measures the change in the number of people employed. Job creation is an important indicator of consumer spending.      

13:30     USD       Core PPI (MoM)                                            0.2%                      0.4%                     

 13:30    USD       PPI (MoM)                                                     0.5%                      0.1%     

The Core Producer Price Index (PPI) measures the change in the selling price of goods and services sold by producers, excluding food and energy. The PPI measures price change from the perspective of the seller. When producers pay more for goods and services, they are more likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation.                

 13:30    USD      Initial Jobless Claims                                   356K                      362K     

13:30     USD      Continuing Jobless Claims                                                        3416K

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week. Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.

13:30     USD      NY Empire State Manufacturing Index         17.4                        19.5       

The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York State.

 14:00    USD      TIC Net Long-Term Transactions                  29.3B                     17.9B    

Treasury International Capital (TIC) Net Long-Term Transactions measures the difference in value between foreign long-term securities purchased by U.S. citizens and U.S. long-term securities purchased by foreign investors. Demand for domestic securities and currency demand are directly linked because foreigners must buy the domestic currency to purchase the nation’s securities.

15:00     USD       Philadelphia Fed Manufacturing Index       11.4                       10.2

The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. A level above zero on the index indicates improving conditions; below indicates worsening conditions. The data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district.

Government Bond Auction Schedule     (this week)

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22